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Empire Electronics, Inc. v. D&D Tooling and Manufacturing, Inc.

United States District Court, N.D. Illinois, Eastern Division

November 10, 2014

EMPIRE ELECTRONICS, INC., Plaintiff,
v.
D&D TOOLING AND MANUFACTURING, INC., Defendant.

MEMORANDUM OPINION

AMY ST. EVE, District Judge.

Before the court is the defendant's motion for summary judgment. For the following reasons, the court denies the defendant's motion.

BACKGROUND

Plaintiff Empire Electronics, Inc. ("Empire") has sued defendant D&D Tooling and Manufacturing, Inc. ("D&D") for breach of contract and breach of warranty. Empire manufactures "wire harness components" for use in the automotive industry. (Def.'s L.R. 56.1 Stmt. of Undisputed Material Facts ("D&D's Stmt.") ¶ 1.) Ken Doman, Empire's CFO (see id. at ¶ 3), testified that Empire sells two product lines relevant to this case: (1) LED lighting for automobile exteriors (e.g., headlights and tail lights); and (2) "harnesses and horn plates within the steering column." (See K. Doman Dep., attached as Ex. 4 to D&D's Stmt., at 8-9.) D&D is in the metal-stamping and metal-fabrication business. (D&D's Stmt. ¶ 6.) In February 2012, the parties agreed that D&D would: (1) build a tool to produce "heatsink" parts for Empire; (2) produce heatsink parts with that tool; and (3) produce "U-shaped" parts using a separate tool that Empire would provide to D&D.[1] (Id. at ¶ 9.) The parties memorialized their agreement in several purchase orders. (Id. at ¶ 10.)

I. Purchase Orders EEH-37498 and 31930

On February 24, 2012, Empire submitted Purchase Order EEH037498 to D&D in connection with the heatsink portion of the transaction:

[Item]

35305-6 TOOL

[Item Description]

DS Heatsink tooling and Prototypes.

Tooling for RH/LH Heatsink for DS LED program. Part #'s 36035 and 36036. Tooling to remain at D&D for production. EAU = 220, 000 combined. Price for production parts = $1.99 (production terms = net 60) FOB = El Paso Texas. Piece price for Heatsink to remain fixed for the life of the program. D&D agrees to support PPAP by providing 600 parts at production price no later than 4/30/2012. Terms for tooling 1/3 with PO - 1/3 with first hits - 1/3 due with PPAP.

(P.O. EEH037498, dated Feb. 24, 2012, attached as Ex. 7 to D&D's Stmt., at 1; see also D&D's Stmt. ¶ 13.) The total price for the heatsink tool was $99, 000. (D&D's Stmt. ¶ 12.) Empire also ordered 500 heatsink "prototypes, " due March 9, 2012, for an additional $5, 000. (Id.; see also P.O. EEH037498, dated Feb. 24, 2012, at 1 (250 "left hand" prototypes; and 250 "right hand" prototypes).) Empire did not pay D&D the first $33, 000 installment for the heatsink tool "with [the] PO." (P.O. EEH037498, dated Feb. 24, 2012, at 1.)

Also on February 24, 2012, Empire submitted Purchase Order 31930 to D&D for U-shaped parts. (See P.O. 31930, attached as Ex. 9 to D&D's Stmt.).) Per the Purchase Order, Empire ordered U-shaped parts in batches (e.g., 5, 000 units) due on particular dates in the future. (Id.) The first such batch was due May 28, 2012. (Id.) Empire's payment for the parts was due "Net 60, " which the parties appear to agree means 60 days from the shipment (not invoice) date. (See id.; D&D's Stmt. ¶ 20; Diedrick Dep., attached as Ex. 6 to D&D's Stmt., at 33 ("Q. Okay. Did you understand that for the pieces on the U part, that there would be payment by Empire for those pieces when they were shipped Net 60? A. Yes.").) The court infers from the record that D&D submitted invoices in connection with part shipments, (see, e.g., Email from J. Walsh to D. Koenig, dated July 20, 2012, attached as Ex. 13 to D&D's Stmt.), but neither party has provided them. In any event, D&D agrees that the purchase orders' terms control. (See D&D's Stmt. ¶ 10.)

II. The March 9, 2012 "First Hits" Deadline

D&D began work on the heatsink tool using data that Empire provided, despite Empire's failure to pay the first installment. (See Pl.'s Stmt. of Add'l Facts ¶¶ 9-10.)[2] D&D sent prototype heatsink parts to Empire in early April 2012, after the purchase order's March 9, 2012 deadline. (See D&D's Stmt. ¶ 16.) Purchase Order EEH-37498 does not define "first hits, " and the parties disagree about whether these prototypes triggered Empire's duty to pay D&D the second $33, 000 installment. William Diedrick, D&D's president (see D&D's Stmt. ¶ 7), testified that "first hits" mean the "[f]irst parts that come off the die." (W. Diedrick Dep. at 77-78.) Kenneth Meissner, Empire's "new product manager" (see Meissner Dep., attached as Ex. A to D&D's Reply, at 32), agreed with Diedrick's definition. (See id. at 146 (testifying that the term means "literally the first time that tool strikes the aluminum").) Ken Doman, Empire's CFO (see D&D's Stmt. ¶ 3), testified similarly: "first hits" mean "the first set of prototypes off the tool." (K. Dorman Dep., attached as Ex. 4 to D&D's Stmt., at 81.) Empire contends that "first hits" mean the first time that the tool produces "functional" parts. (See Pl.'s Stmt. of Add'l Facts ¶ 2.) George Doman, Empire's "purchasing engineer, " (see D&D's Stmt. ¶ 4), offered the following circular definition:

Q. And a first hit is that point in time where the - where the tool hits the material and begins to create a product, correct?
A. Possibly. It mean, if it produces something that's nowhere near ...

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